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The impact of newspapers on consumer confidence: does spin bias exist?

Journal

Applied Economics

Volume

40

Pages (from-to)

531-539

Number of pages

9

Document type

Article

Faculty

Faculty of Economics and Business (FEB)

Institute

Amsterdam School of Economics Research Institute (ASE-RI)

Abstract

It is sometimes argued that news reports in the media suffer from biased reporting. Mullainathan and Shleifer (2002, 2005)
argue that there are two types of media bias. One bias, called ideology, reflects a news outlet's desire to affect reader
opinions in a particular direction. The second bias, referred to as 'spin' or 'slanting', reflects the outlet's attempt to
simply create a memorable story. Competition between outlets can eliminate the effect of ideological bias, but increases the
incentive to spin or slant stories. We examine whether we find some evidence of spin in Dutch newspaper reporting on the state
of the economy. If newspapers are indeed able to create memorable stories this should, according to our hypothesis, affect
the opinion of readers with respect to the state of the economy. Sentiments about the actual state of the economy could be
magnified by spin. As a result, consumer confidence-a variable that routinely measures the opinion on the state of the economy-can
be expected to be affected not only by economic fundamentals, but also by the way these fundamentals are reported. We construct
a variable that reflects the way consumers perceive economic news reported in newspapers. We find that this variable indeed
has a significant impact on consumer confidence, which is short-lived.

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